Question on calculating Exit Year EBITDA in an LBO
I recently had a question on calculating exit year EBITDA in an LBO. I don't remember the exact details but in essence, I was given: entry multiple (10x EBITDA), yr 1 EBITDA ($100), D/E Financing (50/50), Debt paydown in yr 5 of $25, MOIC yr 5 of 3x, and asked to calculate yr 5 exit EBITDA.
This is what I remember. Is anyone aware of the question and/or how best t go about answering it? Thx!
Throw it in goal seek
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Solid call and great GIF. I guess i'm more focused on how to answer in a video interview.
You’d need an exit EBITDA multiple (or make one up) to figure it out. You can find your equity entry amount using the multiple and exit amount using MOIC. I also assume your debt just gets paid down during that five year period less the $25.
I like this question. If assume paydown of net debt = $25 per year instead (High capex?) then 5 year paydown is $125. Assume entry = exit.
Entry ebitda = $100 times: Entry mult. = 10.0x Entry EV = $1,000
d/e = 50/50 Entry (net) debt = $500 Equity check = $500
Entry net debt = $500 less: Cumulative net debt paydown = $125 Ending net debt = $375
Equity check = $500 times: MOIC = 3.0x Sponsor return $ at exit = $1,500
Sponsor return (equity) = $1,500 plus: net debt = $375 EV at exit = $1,875 divided by: assumed exit mult = 10.0x
EBITDA at exit = $187.5
Yes, this is exactly on point and extremely helpful. Thanks so much man!
I got you bro!
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